tv Cross Talk RT November 11, 2013 4:30pm-5:01pm EST
so there i marinate it this is boom bust and here are some of the stories we're tracking for you today. chat room hours will be closed from nine to five at least if you're employed by a big bank that's right banks that may start disabling electronic chat rooms following regulators screw you over what exactly goes on it is chat rooms we'll tell you all about it coming right up and is there nowhere safe to keep your big corn nowadays sadly that actually might be the case now some good point stand it made off with over one million worth of the electronics boutique we'll tell you how they did it and finally best selling author jenna richards joins me in studio today to discuss all things monetary i'm talking currency wars it's all coming up but now let's get to the show.
it looks like chat room time is over for bankers big banks are considering blocking employees from online chat rooms now it is and it comes as a result from concerns by regulators that some chat rooms functions as vehicles for collusion and market manipulation now citigroup j.p. morgan and credit suisse are just a few of the big banks taking preemptive measures and disabling chat room access chat rooms that become intricate to the way traders communicate and trading desks around the world have come to rely on these multiple dealer chat rooms however chat communication has featured prominently in
a five year probe into manipulation of the london interbank offered rate or libel or a probe which has cost banks billions of dollars in settlements and fines. elsewhere on monday fraud a lawsuit was filed in new york state court against three major credit rating agencies now the action was taken by liquidators seeking to recover money lost to bear stearns during the two thousand and seven financial collapse the claim accuses standard and poor's fitch and moody's of assigning artificially high credit ratings to mortgage bonds now when those bonds collapse the funds failed resulting in more than one billion dollars in losses for investors in the complaints liquidator say e-mails which they say prove the agency knew full well that their high quality ratings of these mortgage bonds were bogus representatives for s. and p. fitch and moody's have said the charges are without merit and finally do you know how safe your big queens are inputs dot io a digital wallet company was hacked last month now the bandits made off with more
than four thousand bitcoin and other words one point two million dollars yeah one point two million now the founder of inputs dot aioe released this statement saying quote people are getting refunded but inputs doesn't have enough points to pay everyone fully i don't recommend storing any bitcoins accessible on computers connected to the internet. now here's the thing keeping your biquad away from a computer connected to an internet maze seem a little bit like a paradox and realize heavily on networks of computers across the web but with crypto currency pirates who work it all over the net there may be very few options for safeguarding your big claim beauty so be on the lookout well there you have it we'll be checking these stories and keeping you posted on all the latest as always .
we have seen an unprecedented expansion in the monetary base over the past decade now check this out here's a look at the u.s. base money over the past fifty years there you have it now there's a substantial shift in two thousand and eight you can see there on that chart but this phenomenon is not just limited to the u.s. canada south africa and japan they've all have facilitated extraordinary expansions of their monetary base along with the u.s. and its leading some to call this a competitive debasement of currency now in two thousand and ten guido a month to go brazil's finance minister famously proclaimed quote we're in the midst of an internal excuse me we're in the midst of an international currency war a general weakening of currency that was three years ago when he said it so where are we today joining me now to discuss is james regards author of the bestselling book currency war james are you doing today. for there or how are you going to get
i want to start off by asking you as i just mentioned in the opening i was talking about the worldwide expansion of the monetary base and it seems historically we're now in unchartered waters but you know have we passed the point of no return can we come back from this. well we may be past the point of no return although it takes a while for the consequences to play out it's a very good point we're in uncharted waters in some ways certainly quantitative easing is a massive experiment we're all just consumers and every day americans and people around the world are just guinea pigs of a fact an essential bearing experiment so there really is no precedent for that there is a precedent for money printing and currency wars those have happened several times before and talk about this in my book currency wars was occurrence were from one thousand twenty one to one nine hundred thirty six and another one from one nine hundred sixty seven to one nine hundred eighty seven the point is we're not always in a currency war but when we are they can last for a very long period of time years sometimes decades so this present currents who
were there when it started in two thousand and ten still going on it's actually have new rounds today where in the past few days we've seen the e.c.b. and czechoslovakia explain the czech republic explicitly cutting rates to cheap in the currency we saw this last year that are being omics in japan we saw in two thousand and twelve with brazil so it's going on around the world i expect this will continue for years so that competitive devaluation scenario is continuing by the way countries think they're going to prove exports that's not how you improve exports you improve exports with you know technology innovation education good business climate low taxes value added there a lot of ways to promote exports but you've been in your currency is not one of them all chipping in the currency does it get inflation but that's the point the reason central banks are cheapening the currency they tell the politicians the central bankers say it's to promote exports for that's not true the real reason is to import inflation in the form of higher import prices you know the us is a net importer we import more than we export japan imports massive amounts of
energy so for them a cheap currency means higher import prices that means inflation that's what the central banks really want now you previously said that you expected it to taper in september or never which i kind of like that rhyme right there but it means the time i was burned actually the last chance. to start winding down this third round of q.e. do you still believe this or do you see the possibility of yellen implementing a taper anytime soon. no i mean by the way what i what i said when i said september never ice i said all summer that the fed would not taper but if they were going to taper september is there a way of chance but no i did not expect tapering at all and i still don't as a matter of fact because you know in may when bernanke you started talking about this he said we're going to taper you know is reduce our support says before the end of the year if the economy performs in accordance with our forecast the markets focused on the first part which was the tapering part but they ignored the second part which was the forecast the fed has the worst forecasting record of any major
institution i can think of so when they said we expect the economy to get better my assumption was it would actually get worse which he did because of the say the forecasting is always wrong so my expectation was that they would not taper now they were in december i don't i don't see the i don't see the conditions under which they could possibly taper absent structural changes were in a depression if the fed were to taper i don't expect it but if they did they would be tapering into weakness they would guarantee a recession in two thousand and fourteen i think the data will bear that out they're not going to taper they painted themselves into a corner and where there are no good ways out if they taper they're going to taper into weakness and cause a recession that's why i don't expect it but if they keep printing eventually they'll destroy confidence in the dollar and create an international monetary crisis so there are bad outcomes either way but this is what happens when you manipulate markets you paint yourself into a corner where there are no good ways out now this is actually perfect the way you set this up because it leads to my next question there were a couple of papers presented last week by two federal open market committee
economists and they suggested that the unemployment threshold which currently is at six point five percent be moved down to five point five or five point five percent scuse me and this could suggest keeping rates low through two thousand and seventeen now like you kind of mentioned before is this just the fed testing waters here are how long can they delay the inevitable taper like you said we're in a depression how long can they wait before they take their. well couple things on that on that paper i mean the fed always speaks in code when they say you know we're lowering unemployment the unemployment target from six and a half to five and a half by the way if we go back to december two thousand and twelve i'm sorry december two thousand. december two thousand and twelve when the fed first announced that target it was never a trigger it was always a threshold other words they didn't say we will raise interest rates went on a plan i guess a six and a half percent they said we won't raise interest rates until it gets to six and a half percent but it could get a lot lower than that before we've raised in this paper this confirms that now
saying five and a half but the point is unemployment is going down for the wrong reasons unemployment is not going down because we're creating creating a lot of jobs it's going down because labor force participation is collapsing that's extremely negative for the economy g.d.p. is really just the sum of labor force participation plus productivity so how many people are working how productive are they that's all there is there's nothing else to the economy and the number of people shrinking at a president rate going back to levels last seen i think in one thousand nine hundred eighty eight and that that's when women were you know entering the workforce in very large numbers of so we were going backwards in time to a time when women did not participate in the workforce to the extent they do today so our labor pool was in fact dropping that's extremely negative for the economy what the paper really says is that they've given up on real growth and they're targeting nominal growth and inflation this is just nominal g.d.p. targeting by another name and if we're growth isn't good enough and you have to get nominal growth to a certain level you make up the difference with inflation and that's what the paper
really says let's bring on the inflation to do that it is going to print money and so that's what yellen the stilling yellen that by the way is in that paper is completely in accord with her views as expressed in prior speeches and papers and other interviews she's given so i just think though it will keep running through i would expect the next change in policy will not be tapering it will be an increase in answer purchases i think is a good. as a recession of two thousand and fourteen if we don't see any fiscal relief the fed will have to respond to that by increasing us or purchases now you have a long form of. paper your own otherwise known as a book that's coming out that's called scuse me the death of money of the collapse of the international monetary system now let us point blank what would trigger such a collapse in your opinion. well collapse usually comes from a loss of confidence and confidence is a very intangible thing the problem with policymakers the fed in particular but
also the white house and the treasury they use these equilibrium models and they think that you know if. for a nominal g.d.p. is high enough they can print money create some inflation get nominal g.d.p. on a sustainable path withdrawal policy replace nominal g.d.p. with real g.d.p. as i say this is what the equilibrium models would predict and this is what they rely on but in fact the world is not an equilibrium system it's a complex system and complex systems are characterized by sudden sharp changes what physicists call phase transitions where i think a more popular terminology would be a tipping point but you can push you can print and print and print right up to the point of collapse and suddenly confidence disappears so i think the policymakers take confidence for granted they're in the process of destroying confidence slowly at first and then very suddenly and by the way when i talk about the collapse of the international monetary system that's not meant to be a provocative statement the international monetary system actually has collapsed three times in the past hundred years it collapsed in one thousand nine hundred
eighteen one nine hundred thirty nine and again in one thousand nine hundred eighty one so these things do happen and it doesn't mean the end of the world it doesn't mean we all go you know live in caves or canned goods what it means is that the major trading financial powers have to sit down and reform the system create a new system to replace the one that failed and so what what i do in the new book is i look forward and say what what could the new system look like who would the players be they for example china was not a player in the one nine hundred seventy s. they were when we the last time this happened the smithsonian agreement one nine hundred seventy one and some subsequent meetings china was his around of course but it was not a big factor in the international monetary system this time they will be a player so what does that mean so look at the future of the international monetary system and thing. about what some of the alternatives would be the current dollar system now jim we have to go to break but you've got to stick around for us because coming up how realistic is a return to the gold standard jim rickards is going to stick around to talk about
why such a shift in monetary or gene isn't so farfetched also with the greek islands at bargain basement prices is now the time to invest i mean who doesn't want a greek island owing to your own fears about homeric landscape it may be more of a headache and it's actually worth though rachel prisoners and i discussed this very matter in today's big deal and as we had to break here's a quick look at some of today's those numbers of the bell on that.
and we're back with more from general records and we have been talking about the likelihood of a fed taper and the future of the monetary system but jim i want to start off by asking you this you have said that the best way to ensure financial stability would be an adoption of a quote flexible gold standard in which major currencies are a link to the price of gold why so why why. well basically it takes away the inflation option it's as simple as that we we did have by the way a very successful international gold standard from eight hundred seventy to one nine hundred fourteen that was a period characterized by enormous growth. technological innovation price stability actually there was some mild deflation of the good kind good deflation is when
prices just go down you know things cost you less your standard of living goes up there was a very successful period then that was abandoned at the beginning of world war one because they needed to print money to fight the war and then replaced with a modified gold standard in the twenty's and thirty's another collapse followed by a model another modified gold standard father another collapse in one nine hundred seventy one so what gold is the reason central bankers don't like it and the reason everyday citizens around the world should like it is because it gives you price stability in other words you create wealth with ideas technology you create wealth with entrepreneurship you create wealth through hard work by taking risk that's the way you create wealth you don't pretend to create wealth by printing money now the problem with inflation and you know what the what the fed and the economists say is people point out the dollar has lost ninety five percent of its value since the creation of the fed one hundred thirteen and that's true the purchasing power of dollars today is what a nickel would have got you know one hundred years ago but the economists say well
yes but you know your wages have gone up and income has gone up the stock market has gone up so maybe the dollar's worth less but everything else is going up in the sort of you comes out people are maybe slightly ahead they call that money neutrality that may be true on average but it's not true individual by individual what inflation does it creates winners and losers the winners are the people who can see it coming and prepare for it so the bankers speculators hedge funds elites and other people who are prepared for the losers are everyday citizens people who rely on pensions annuities insurance policies retirement income savings and the kind of fixed income where your dollar amount is fixed and you're relying. on price stability in purchasing power you lose in inflation so this is very detrimental to social cohesion it can lead to operates a social disorder and riots the collapse of cultures. even the ethics morality as we saw and while more republican before that austria i was talking to
a guy recently who lived through a serbian hyperinflation in the one nine hundred ninety s. not as well known of course is the one where hyperinflation he said people in serbia they were cleaning out tanks to fill in the gasoline as a way to get purchasing power as they wanted to dump the currency and get something valuable which was gasoline but of course you know houses were blowing up and fires were being caused and that shows how desperate people can be to get some kind of price stability so gold takes away the inflation option taking away the inflation option helps savers imprudent citizens it hurts the speculators but too bad now i want to go back to you know girl like you just brought up servia and oil that was that was their form of you know currency if you will at the time as a way of purchasing power right but you say that you know currencies are going to grow all that the price of gold that would be best why gold why not some other precious metal why not diamonds. well the problem with diamonds is actually they're not that scarce i mean there's there's this myth that diamonds are scarce that's a result of a long you know advertising. program by the dubious cartel the don is actually
aren't that scarce. a dime is going to be set aside so. in theory anything could be a commodity standard you could have wheat or corn or you could have a lot of things but when you actually look at them what you find is that they degrade over certain other you know first metals rust oil is not uniform there are ninety grades of oil around the world you know we trade brand west texas but there's just benchmarks there are high sulfur low sulfur high viscous low viscous kinds of oil around the world the beauty of gold it's an atomic it's an element tomic number seventy nine it doesn't rust it doesn't corrode you actually it's very hard to destroy you have to use an explosives or certain very powerful acid so it's not that shiny and special it's not magic it's just the case it's extremely practical as a commodity standard and so that's that's why you know countries and civilizations are chosen go for thousands of years and why it's still valuable now doesn't mean
you cannot have a discretionary monetary policy by the way it's just if you tie the dollar to gold and say we're willing to buy you know we the united states government or any global central bank are willing to buy and sell gold to the fixed price you have to stand up to the market so if you print too much of your money and people start to lose confidence and they come in with the money and say give me the gold you have to give them the gold at the fixed price so it doesn't mean you can't have a discussion or monetary policy it doesn't mean you can't print money it just means that whenever you do you're tested by the market against gold and people want the gold to come and get it by the way i tell people you know you can go on a personal gold standard today just by buying gold you don't have to wait for central banks to do this you know warren buffett does something very similar when he bought the burlington northern route he if you think about that transaction he dumped paper currency and bought a river which is nothing but hard assets it's a land where all rolling stock switches you. robots make money by moving other hard assets like coal corn wheat steel etc so that so warren buffett is getting out of paper money into hard assets when he bought the railroad maybe you know we all
can't afford to buy an entire row but we can buy some some gold it's like a ravinia believe he was the one who said you know if everything really really turns south by spam you can actually sell any spam you can eat gold just depends on what's necessary at the time but my next question is now a form of bush treasury official. he said that maintaining the dollar is a world reserve currency is a quote national security issue what do you see the u.s. government doing if it looks like the dollars reserve currency status is actually challenged. well by the way coming back to her being he was also the one running around for three years saying the euro was going to fall apart greece was going to get kicked out spain had to quit the euro and the fact the euro is strong and getting stronger new members have been added so just kind of job in terms of being these forecasts are but one is excellent analyst national security who is a senior counterterrorism official in the bush administration now at c.s.i.s. in washington he's exactly right you cannot have
a strong national security without a strong currency and when you cheap in the currency the way the fed is trying to do in fact the treasury in the white house have been supporting that and we can national security we're seeing that all over the world right now saudi arabia egypt and russia and others are discussing an axis to break away from the united states because it appears united states is unwilling to stand up to its security guarantees to saudi arabia the u.s. seems to be facilitating the rise of iran as a regional hedge a man that will be at the detriment of saudi arabia what the u.s. will find out is that the saudis will no longer accept dollars for oil though insist on some other currency they're actually working on a regional reserve currency the g.c.c. members including saudi arabia are trying to organize a central bank you have other possible currencies that could be used including the euro as germany continues to consolidate europe and make that a more creative european wide bond market european banking regulation bank insurance there are a lot of actors around the world the fed seems to be oblivious to this or maybe
they don't care but we're jeopardizing u.s. national security by weakening the dollar so i agree completely with their view on that jim i one last quick question i'm going to need a quick answer because i have to go but i want to ask you if we do see a loss of confidence in the dollar how realistic was returning to the gold standard . well the main thing about the gold standard when countries went back to the gold standard after world war one they committed a major blunder particularly in england winston churchill was transferred the exchequer of the time he went back at the pre-war war one price countries had doubled the money supply so there's a parity between gold money they've doubled money if you want to go back to a gold standard you either have to double the price of gold or cut the money supply and have to get back to the old parity they were back at the old price which meant you had to reduce the money supply that contributed to the great depression so the key to a gold standard is you've got to get the price right people always say there's not enough gold in the world to have a gold silver well there's always enough gold you just have to get the price right the started on evolutionary prices north of seven thousand dollars an ounce i want
to hear more of this you got to come back get a promise to come back but we're running out of time thank you so much that was jim rickards economist and author of the bestselling book currency war coming out now the big deal. welcome to the big deal i'm joined by the one the only are cheaper to serve rachel herz the us and we want to discuss a way to fight those monday blues and escape to aggression island yup that's right but a new article from courts says that despite the low prices buying one of these little islands making more trouble than it's actually worth so much so why shouldn't we be buying this gorgeous piece of real estate so i say it's on the cheap why not do it i know it does look great but if the question is why exactly you want to buy this creation island if you're looking for just
a beautiful escape if you want some beaches to call your own then perhaps it is a good idea to buy the grecian islands but what some people are saying as in this court's article is that if you're looking to buy an island to develop it in order to create kind of more more tourism if you want to make your own hotel or yoga center or spot or whatever you're looking to in this creation island you should. probably go to a place like nova scotia instead because greek bureaucracy is still so bad that even though they might need the money that would be generated by a venture like this it's just going to be too difficult it's going to give you too much of a headache and ultimately it's not worth you know do your vacation destination in nova scotia groups that's how about it is great exact will people say nova scotia is a beautiful place i'm not going to eat on the way and i would if you stayed on canada seems like a very lovely location but yet it seems like there are other islands where if you're actually looking to develop and build to there they might be more well suited to if you're looking solely for the status of saying you own a greek island you can call yourself a shipping magnate or whatever you want you might want to still stick with greece there are a lot of those islands on the market they're selling for cheaper than they used to
so anywhere else people should be looking for islands well i'm going to say canada i'm going to go bullish on can of them totally into canada but again it depends exact i mean if you're looking for glorious sands maybe canada is not the place for you you might want to look towards bermuda bermuda or me the two yeah i would never say no to someone buying me an island and i mean i'm not going to refuse it yet you know that we will not work for using an island we'll take it but i don't think it was a good rachel thank you i always one more time with you but you'll be back tomorrow there you have about software today but you can see all segments featured in today's show on you tube or you tube dot com slash boom bust r.t. we also love hearing from you so please check out our facebook page at facebook dot com slash boom bust r t from all of us here at boom bust thank you for watching you next but i.
win western politicians and media invoke the phrase international. it almost always reflects the thinking and agenda of washington and its closest allies around the world in this matter the international community is in fact a very small minority. body has something to say everybody. want to sit next to on an airport. i mean there's always in the water. that's whether it's a ballet dancer a ballplayer present things that are curious to visitors things i think about.
with max cons or a no holds barred look at the global financial headlines tune into cons a report. coming up on r t a deal or no deal the latest round of diplomatic talks on iran's nuclear program ended over the weekend so what exactly came from this high stakes meeting the latest up ahead and protests over the fatal police shooting of a california teenager police officers claim that the thirteen year old's toy looked like an eight forty seven but andy lopez's family says there is more to it more on the protests coming up and a battle is brewing between old and new in the taxi industry while regulations increase operating costs for d.c. count drivers new competitors are eating into the profits we'll tell you more later in the show.